IAS-2 – Inventories :

Inventories should be valued at the lower of cost and net realisable value. Net realisable value is selling price less cost to complete the inventory and sell it. Cost includes all costs to bring the inventories to their present condition and location. If specific cost is not determinable, the benchmark treatment is to use FIFO or weighted average. An allowed alternative is LIFO, but then there should be disclosure of the lower of (i) net realisable value and (ii) FIFO, weighted average or current cost. The cost of inventory is recognised as an expense in the period in which the related revenue is recognised. If inventory is written down to net realisable value, the writedown is charged to expense. Any reversal of such a write-down in a later period is credited to income by reducing that period’s cost of goods sold.